ITAT decision: Depreciation, Revenue Expenditure, TDS Credit, Intangible Asset Revaluation

The ITAT partly allowed the assessee's appeal by directing the AO to reconsider the disallowance of depreciation on non-compete fee and treating the cost of production of TV serials and programs as revenue expenditure. The ITAT also instructed the AO to expeditiously consider the application for credit of TDS. The Revenue's appeal against the direction to allow depreciation on the film software library at 25% was dismissed, upholding the treatment of the software library as an intangible asset subject to revaluation.

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Issues Involved:
1. Disallowance of depreciation on non-compete fee.
2. Disallowance of cost of production of TV serials and programs.
3. Credit for TDS not granted.

Detailed Analysis:

1. Disallowance of Depreciation on Non-Compete Fee:
The assessee, engaged in Satellite Television Broadcasting, filed its return of income declaring “nil” income after setting off total profit. The AO disallowed the depreciation on non-compete fee, observing that it is not a right acquired by the payer but a restriction on the recipient. The CIT (A) upheld this disallowance, following the decision in the assessee’s own case for the A.Y. 2011-12 and considering the ITAT's decision in the parent company’s case, M/s. Ushodaya Enterprises Pvt. Ltd. The ITAT remanded the issue back to the AO for reconsideration after a decision on the allowability of the non-compete fee in the parent company’s case, emphasizing the need to examine the impact of equity share acquisition by M/s. Equator Trading Enterprises Pvt. Ltd.

2. Disallowance of Cost of Production of TV Serials and Programs:
The assessee claimed an amount towards the cost of production of TV serials and programs, which the AO treated as capital expenditure, allowing only 25% depreciation. The CIT (A) confirmed this treatment. The ITAT referred to similar cases, including M/s. Prism Television Pvt. Ltd. and M/s. Sun TV Network Ltd., where it was held that such costs should be treated as revenue expenditure. The ITAT directed the AO to treat the expenditure as revenue expenditure, aligning with the precedent set by the Hon'ble Delhi High Court in CIT vs. Television Eighteen India Limited.

3. Credit for TDS Not Granted:
The assessee claimed credit for TDS, which the AO partially allowed. The assessee did not initially challenge this before the CIT (A) but filed an application u/s 154 of the Act before the AO, which was pending. The ITAT noted that the issue was not arising out of the CIT (A)'s order and directed the AO to consider the application expeditiously.

Additional Judgments:
The Revenue’s appeal against the CIT (A)’s direction to allow depreciation on the film software library at 25% was dismissed. The ITAT upheld the CIT (A)’s order, which followed the ITAT's direction in the case of M/s. Ushodaya Enterprises Pvt. Ltd., treating the software library as an intangible asset subject to revaluation.

Conclusion:
The ITAT partly allowed the assessee’s appeal and dismissed the Revenue’s appeal, directing the AO to reconsider the issues based on the precedents and additional evidence provided.

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